Acting through Gaul and another
firm principal, his firm negligently
omitted material facts in connection with its sales of promissory
notes.
The notes were issued by an entity that a real estate
developer controlled. Acting through Gaul and another firm principal,the firm negligently failed
to disclose to investors
that the entity had been experiencing cash flow problems and that
the entity and other
companies affiliated with the real estate developer failed to make
required interest
payments to investors.
Acting through Gaul and
another firm principal, the firm negligently failed to disclose that it was
unlikely that the entity’s
affiliated company would be able to make its scheduled principal
payments totaling $10
million that were due to its note holders.
Acting
through Gaul, the firm failed to establish, maintain and enforce a system
of supervisory control
policies and procedures that tested and verified that its
supervisory procedures were
reasonably designed with respect to the activities of the firm,
its registered representatives
and associated persons to achieve compliance with applicable
securities laws and
regulations, and created additional or amended supervisory
procedures where such testing
and verification identified a need. The firm’s supervisory control
policies and procedures
failed to identify producing managers and assign qualified
principals to supervise such
managers.
The firm also failed to notify FINRA electronically of
its reliance on the limited
size and resources exception. For a year-end, the firm, acting through Gaul,
failed to prepare an annual
certification from its CEO, or equivalent officer, that it had in
place processes to establish,
maintain, review, test and modify written compliance policies and
WSPs reasonably
designed to achieve compliance with applicable FINRA rules, MSRB
rules and federal
securities laws and regulations, and that the CEO had conducted
one or more meetings
with the firm’s CCO in the preceding 12 months to discuss such
processes. For another
year-end, the firm, acting through Gaul, filed an annual
certification that did not fully
comply with FINRA Rule 3130(c).
Acting through Gaul, the Firm failed
to establish, maintain and/or enforce WSPs reasonably designed to
achieve compliance
with the laws and regulations applicable to its business in
conducting private placement
offerings (including training representatives regarding the risks
for these offerings and
establishing standards for determining the suitability of these
offerings for investors), the
review of electronic correspondence, and the review and approval
of advertising materials.
James Carl Gaul (Principal): Fined $10,000; Suspended 30 business days in all capacities; Suspended 18 months in Principal capacity only